NEW YORK, March 5, 2022 (Newswire.com) - iQuanti: Pawn shops let people buy and sell all sorts of items, but you can also get quick loans by putting down an item as collateral. These loans can be easy to get and offer several benefits, but there are some drawbacks to consider before diving in. Read on to learn how pawn shop loans work, their pros and cons, and some alternatives to consider.
What are pawn shop loans?
Pawn shop loans are quick loans that require an item of value you own as collateral, like jewelry or artwork. They don't require any credit checks and are quite fast. All you have to do is bring in your item for the pawn shop to appraise and get an offer. If you accept, the pawn shop will give you a ticket you can use to reclaim your item once you pay off the loan.
Pros of pawn shop loans
Here are some benefits of pawn shop loans:
You can get them fast
Pawn shop loans are some of the fastest loans you can get. The pawn shop can usually appraise your item and give you an offer that same day.
There are no credit checks
Pawn shops don't consider your credit. They lend based solely on your collateral's value. So, a pawn shop loan could be a good borrowing option if you have poor or no credit.
If you default on your loan, the pawn shop will take your item and put it up for sale to recoup their funds. They won't send collections after you.
Cons of pawn shop loans
Pawn shop loans also come with drawbacks, including:
They're short-term loans
Pawn shop loans tend to have 30-day terms. This may not give you enough time to come up with the funds to repay the loan.
They come with high interest rates and fees
Pawn shop loans can have high interest rates and fees. Depending on the loan size, this can make it a challenge to pay back the loan on time.
You could lose your item
If you fail to pay back your pawn shop loan, you'll lose your collateral. The pawn shop will take legal possession of the item and put it up for sale. This can be quite a significant drawback if you value the item you're pawning.
Pawn shop loan alternatives
If you're not sure whether a pawn shop loan is right for you, here are some alternatives to consider:
Cash advances are short-term, small dollar loans that you can use to cover expenses before your next payday. You'll typically these loans in two to four weeks, when you get your next paycheck. These loans often come with instant approvals, same-day funding, and lenient credit score requirements, so you may get approved quickly and don't need good credit.
Title loans let you use your car title as collateral if you own the vehicle outright. The lender will inspect and appraise your car, then offer you a loan amount worth 25 - 50% of the car's value. If you accept the loan offer, you can receive your funds that same day. You also get to keep driving your vehicle while the loan is outstanding.
Should I get a pawn shop loan?
Pawn shop loans have several benefits, such as no credit checks, quick approval, and fast funding. But these loans also come with high interest rates and fees, and you can lose your item if you default.
Overall, a pawn shop loan can be an option if you have poor credit and you have a valuable item that you're willing to risk giving up. But if you don't want to go this route, you could also consider alternatives like a cash advance or a title loan. Make sure to weigh the pros and cons of pawn shop loans and consider the alternatives before taking one out.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.